Sprinkel To Head Economic Advisers

Ex-chicagoan Reagan`s Choice

WASHINGTON — President Reagan on Thursday nominated Beryl W. Sprinkel, undersecretary of the treasury for monetary affairs, as chairman of the Council of Economic Advisers.

In choosing Sprinkel, Reagan has found his kind of man. Sprinkel is devoted to free-market economics. He is a strong ``monetarist`` economist in the Milton Friedman mold. And he has learned to keep his mouth shut.

More importantly for keeping order within his administration, the President picked someone who is the opposite of Martin Feldstein, the former council chairman. Sprinkel is a loyalist who believes firmly in the administration`s economic program--a maker and defender of the party line.

Sprinkel, 61, was executive vice president and chief economist at Harris Trust and Savings Bank in Chicago, where he worked for 28 years, before joining the Treasury.

Sprinkel`s appointment represents a high-water mark for the monetarist school of economics, which holds that the rate and amount of money creation by the Federal Reserve Board is paramount in determining the level of economic activity and prices.

``He`s more of a monetarist than anybody who has been in this position,`` said Herbert Stein, chairman of the council under President Nixon. ``But it`s in keeping with the trend of the profession.``

``The profession is becoming more monetarist, and the Federal Reserve is become more monetarist,`` Feldstein said in an interview.

Feldstein praised Sprinkel`s appointment, saying that the former Chicago economist will play a key role in fighting pressure to ease up on monetary policy to keep the economy going.

``Beryl will be an effective rebutter,`` Feldstein said.

Sprinkel is called a ``high-church monetarist`` by William Niskanen, a member of the council who had hoped to get the job. Niskanen plans to depart the council soon, leaving two slots to be filled.

In a recent interview, Sprinkel said, ``There`s no doubt in my mind that policies all over the world have moved`` in the direction of steady money growth and more free-market orientation.

Although Sprinkel has reached a key position, the council`s high-profile public role is being downgraded. White House chief of staff Donald T. Regan, who publicly feuded with Feldstein, and Treasury Secretary James A. Baker want the council to play a behind-the-scenes role.

Deputy press secretary Larry Speakes, however, said that Reagan, in nominating Sprinkel, wanted ``to revitalize`` the council. Speakes said Reagan planned to fill the other two vacancies on the three-member council and boost the professional staff.

In the eyes of critics, Sprinkel has been too doctrinaire and opposed for too long action by the U.S. government to intervene in markets to stem the rise in the dollar`s value.

The treasury undersecretary`s post is a key one, because it involves relations with the Federal Reserve and international financial policy.

In the recent interview, Sprinkel again opposed artificial intervention in currency markets, saying that the answer to the strong dollar is stronger economic growth in Western Europe. Not long after, the U.S. intervened in the markets in response to political pressure from Europe, but the dollar still rose in value.

Sprinkel was reluctant to say the dollar is overvalued, because, as he put it, ``the market clears every day.``

He said that if the deficit is reduced by Congress, he didn`t expect it would have much effect on the dollar`s value.

Some saw Sprinkel`s appointment as a setback for ``supply-side``

economists, who stress that tax cuts free the economy and provide incentives for work, investment and higher economic growth.

Actually, Sprinkel got along well with the contingent of supply-side economists at the Treasury Department and supported Reagan`s 1981 tax-cut bill.

Stein disagreed that the appointment was a defeat for supply-siders, because ``there are only two or three of them in the entire country.``

In the interview, Sprinkel expressed the belief that inflation and interest rates would fall more in 1985. He said it`s possible that inflation could come down to zero, although he refused to pick a time for this to happen.

His chief gripe about the Federal Reserve Board, he said, is that it has for too long believed that it could regulate short-term interest rates and thereby fine-tune the economy.

When Regan, as treasury secretary, criticized the Fed openly in 1984, Sprinkel provided much of the intellectual rationale for the criticism.

Sprinkel will not be in an operational role as chairman of the council. His only clout will be in the quality of his advice to the President and whether Reagan listens to him.

Sprinkel previously taught economics and finance at the University of Chicago and the University of Missouri School of Business and Public Administration.

Born on a farm in Richmond, Mo., Sprinkel is a 1947 graduate of the University of Missouri. He received his master`s and doctor`s degrees from the University of Chicago.